If the “trickle down economy” theory does in fact work, why is it that with US oil companies making record profits, gas prices are one of the top financial issues that a lot of people are dealing with? I don’t want a debate on whether or not trickle-down economy does or doesn’t work, I just want someone who subscribes to this theory to explain to me why it’s hard to afford to drive to work, not to mention any extra places I might want to go, while companies like ExxonMobil are the largest (wealthiest) in the world.

semo88 wrote:If the “trickle down economy” theory does in fact work, why is it that with US oil companies making record profits, gas prices are one of the top financial issues that a lot of people are dealing with? I don’t want a debate on whether or not trickle-down economy does or doesn’t work, I just want someone who subscribes to this theory to explain to me why it’s hard to afford to drive to work, not to mention any extra places I might want to go, while companies like ExxonMobil are the largest (wealthiest) in the world.

You have to have some nexus with the trickler.
If businesses are given leeway, they are able to make more money and trickle down to employees, partners, and shareholders.
ExxonMobil has trickled down a lot of money to its shareholders (look at their stock prices and earnings), but its not like they're going to reduce their prices just because their making more money and give you a break. If your in the club, you get to share, sometimes at least. Do you think FedEx and UPS will cut consumer prices just because they have raised their rates with the gas prices?

those companies are the largest in the world because they deal exclusively in the trade of the most valuable commodity in the world, and you are willing to pay ANY price to keep getting it.

the more a business makes, the more jobs they create, the more they grow, the more they spin off other businesses, the more they diversify, the more jobs are created, the wealthier we all get...

the problem is that government intervenes, taxes to death, and regulates these businesses because they are "evil". if government would ease up on the extreme restrictions they impose on the "evil oil companies", and lessen the unbelievable taxes they impose on them and their product, they would grow and expand so much your head would spin. every american would be stadily employed in the drilling and refining business .as it is now, they have little choice but to stash huge profits and work to find ways to lessen their tax burden.

our government throws a lead balnket on them, then steps back pointing their finger yelling, "look at those @****** hiding with all that money.... we should take it"

muleskinner wrote:you were born with a silver spoon in your mouth and a benalli in the other.

As I’ve posted on here before, I don’t think it’s right to tax someone more than others simply for being successful. However, I think that saying that too much taxation is the reason we’re paying ~$4 (depending on where you live) is ridiculous. Either way, we’re not talking about a company making a couple hundred million, we’re talking billions upon billions of dollars. You’re telling me that the poor oil companies have to charge $4 a gallon because they’re taxed too much? Again, I don’t buy into the “evil oil companies” bit, and simple economics tells me that increased business tax pretty much means increased sales price, buuuut have taxes quadrupled over the same period as the price of gas has? (if they have please inform me, I really don’t know)

you missed the point. the oil companies can charge whatever they want. and they should. thats exactly what i would do, and so would you.

the reason they dont trickle any of that huge profit down to our economy is because of government. the price of oil is the price of oil. all our money is going in a pit without a bottom instead of getting put back into our lives because the government leaves them zero coice in the matter. think about the restrictions the gubment has put on them.

that also has the benefit (for gubment of course) of being able to tax all that money falling into the pit because it cant be used or shown for anything but profit. if the oil companies were allowed to expand and grow, which would "trickle down" truckloads, most of that profit would be un-taxable.... then what would the little bloodsuckers do?

Last edited by pennsyltucky on Tue Sep 30, 2008 7:00 pm, edited 1 time in total.

muleskinner wrote:you were born with a silver spoon in your mouth and a benalli in the other.

Semo, you're kind of mixing apples and oranges. The price at the pump is dictated, just as in any business, on the cost of production, R and D, distribution, taxes and probably other components I didn't list. One of the reasons that the oil companies are making record profits is because of the commodity nature of oil-I buy oil today at $110 and it goes up to $120 tomorrow I just made a profit and didn't have to do anything, and any other oil I have in inventory is also worth that much. One mistake we make is to think that any company owes anything to anyone but their stockholders. And if you have any sort of pension plan you own stock in various companies. Businesses, any business, charges what they can for their product. If the price is too high people change their buying habits. In your job you ask for the pay rate just below what will make your boss choke, same thing. Businesses are not tax payers, they are tax collectors since taxes are a cost of production and are factored into the price you pay. Not just gallon taxes on gas but state and federal income taxes, which are taxed twice: once in the profit of the company and once on the dividend paid to the shareholder. And any profit made from sellling stock is taxed at the capital gains rate, just like any profit on your house above $250K now for a single. "Trickle down" economics is the economic theory that holds that if marginal tax rates are cut, the tax savings, for both individuals and companies, will circulate through the economy creating more demand, creating more jobs, and because of that increase tax collections will increase through more business activity. It works up to a point, which has probably been reached.

rmh wrote:Semo, you're kind of mixing apples and oranges. The price at the pump is dictated, just as in any business, on the cost of production, R and D, distribution, taxes and probably other components I didn't list. One of the reasons that the oil companies are making record profits is because of the commodity nature of oil-I buy oil today at $110 and it goes up to $120 tomorrow I just made a profit and didn't have to do anything, and any other oil I have in inventory is also worth that much. One mistake we make is to think that any company owes anything to anyone but their stockholders. And if you have any sort of pension plan you own stock in various companies. Businesses, any business, charges what they can for their product. If the price is too high people change their buying habits. In your job you ask for the pay rate just below what will make your boss choke, same thing. Businesses are not tax payers, they are tax collectors since taxes are a cost of production and are factored into the price you pay. Not just gallon taxes on gas but state and federal income taxes, which are taxed twice: once in the profit of the company and once on the dividend paid to the shareholder. And any profit made from sellling stock is taxed at the capital gains rate, just like any profit on your house above $250K now for a single. "Trickle down" economics is the economic theory that holds that if marginal tax rates are cut, the tax savings, for both individuals and companies, will circulate through the economy creating more demand, creating more jobs, and because of that increase tax collections will increase through more business activity. It works up to a point, which has probably been reached.

That was a very helpful post, thanks a lot.

Thanks to the rest of you guys also for helping me to understand things a little better.

Back to trickle down for the moment. In its simplest form, if people keep more of their money with lower taxes, they spend it as they see fit. The people they spend it with, then spend it elsewhere on salaries or supplies, etc. etc.

The money changes hands pretty quickly and in the end, actually generates more tax revenue through sales and income taxes. So in the end, a tax break (trickle down) actually creates more tax revenue.

This is a concept that many just can’t understand. They see it as a zero sum game meaning a tax cut is less money for the government, which would be fine with me, but it isn’t true.

When government seizes more of your money, it will end up back in the economy eventually, but at a much slower pace. And naturally, you will have no control over it.

When money is put in the hands of consumers, it pumps life into an economy.

The same concept holds true with capital gains. A bump in capital gains tax will only increase revenue in the very short term as investors decide that they are unwilling to put money at risk if the government is going to take 30% or more. I won’t invest in individual stocks if the capital gains tax is raised. And there goes the tax revenue for the government.

Lower taxes grow the economy and tax revenue for the government. Win-Win-Win.

Trickle down isn't charity. It is a proven method of creating wealth accross the board. By allowing the larger companies to actually produce, they in turn need to hire labor and buy materials, goods, and services.

This is how wealth is created and distributed accross a population. Companies do not have an obligation to hire people and give them jobs. They hire them to make money off of ther labor.

A lot of the "trickle down" is missed in the U.S. owned companies. Our domestic production rate is not even close to what it could be. If we started more and more domestic poroduction, that would create more of a "tricle down" through jobs.

Because our U.S. owned oil companies are middle men, a lot of the labor is left on the table on the production side. Domestic drilling can be the catalist that gets us out of this economic slump. We need to create more wealth in this country and have it spread across the population in the form of wages.

If conservative style "trickle down" economy really works so well, my question is this: Why when Bush Sr. left was the economy so bad? and now after 8 more years of the same is it bad again? Granted there was a slight recession at the end of Clinton's presidency due to stupid investors paying outrageous amounts of money for Internet companies that really didn't have assets or profit potential to warrant their prices. Someone on here says its proven to work, when?

brucetonbottombandit wrote:If conservative style "trickle down" economy really works so well, my question is this: Why when Bush Sr. left was the economy so bad? and now after 8 more years of the same is it bad again? Granted there was a slight recession at the end of Clinton's presidency due to stupid investors paying outrageous amounts of money for Internet companies that really didn't have assets or profit potential to warrant their prices. Someone on here says its proven to work, when?

Because the economy wasn't "bad" in 1992. There was a slight recession in 1991 which was getting worked out by the election. People thought it was bad because that was what they were being told, just like now. Cutting tax rates in the 1980's (and they were up in the 80% marginal range) actually increased tax revenue across the board, the deficits were then created because neither Reagan nor the Democratic Congress could resist raising spending. That followed a massive recession that lasted from about 1978 to 1982 that saw interest rates at 18% and unemployment at 10%+. What has driven the economy the last few years is residential house prices/construction. That house price has to come down, and it will, because the median income worker can't really afford the median priced house now. Job loss in manufacturing has two pieces and only off shoring is mentioned. The other piece is that the US worker is way more productive than anyone else-more product per worker means fewer jobs. And that has been going on for a hundred years when we were underpricing the British. Right now, this minute, in the US as a whole unemployment is still at an historic low as are interest rates. An example of how higher taxes change habits: MD raised the cigarette tax last year and predicted a huge increase in revenue. That didn't happen, cigarette tax revenue decreased because people have quit smoking or are going to PA or VA to get their smokes. That tax was raised in a special legislative session that was called to lower spending by $500 million and ended up with $1.5 billion in more spending, with the associated tax increases across the board. So guess what? MD still has a $500 million deficit.

First, who owns the oil companies? Virtually everybody either directly or indirectly. If you have a pension, you own American oil companies. If you have any sort of mutual fund such as in a 401(k), you own American oil companies. This is part of what causes your pension fund, retirement accounts, or mutual funds to grow. Go search about who owns these companies, yes it's some fat cats, but it's a lot of "institutional" investors, which is mutual funds and pension funds. It is making you more wealthy when the grow. Also it is Americans that work for American oil companies, this increases employment and puts upward pressure on wages. Salaries are based on supply and demand just like oil prices. You want a job where demand is high and supply is low. That's the only way you will make a lot of money working for somebody else.

Second, it does not matter who is President or who controls congress, there will be ups and downs in the economy. Low tax rates, rational regualtions, etc., lead to the highest average growth rate in the economy and the quickest recovery from the inevitable down turns. Down turns usual result from excesses like we saw with the crazy housing bubble that just collapsed and the wreckage from the bubble bursting needs to work its way through the system. Too much "help" from the government and it will drag on too long. Too little help and it will drop precipitously dragging a lot of good business along with it, but it will recover faster. We just want to provide a shock absorber, but that will cost us.

Stupid people can cause problems, but it usually takes brilliant people to create a real catastrophe. Thomas Sowell